Merchants, Inc. sells Product X to retailers for P200.
The unit variable cost is P40 with a selling commission of 10%. Fixed manu
The target sales if after tax income is P123,200 would be:
A. 19,950 units
B. 15,640 units
C. 18,750 units
D. 11,400 units
ANSWER: D
Target income 123,300.00
Divide: 1-Tax rate 70%
Target Operating Income 176,142.86
Add: Fixed Cost
Manufacturing 1,000,000.00
Selling and Admin 420,000.00 1,420,000.00
Taget CM 1,596,142.86
Divide CM per unit
Selling Price 200.00
Less: Variable Cost (40.00)
Sales commission (20.00) 140
Target Sales in units 11,401.02
Neth and Company has sales of P400,000 with variable cost of P300,000, fixed cost of P120,000 and an operating loss of P20,0
A. P400,000
B. P462,000
C. P500,000
D. P800,000
ANSWER: A
Old
Sales 400,000.00 100% 800,000.00
Variable Cost 300,000.00 75% 600,000.00
Contribution Margin 100,000.00 25% 200,000.00
Fixed Cost 120,000.00 120,000.00
Operating Income (Loss) (20,000.00) 80,000.00
Change in sales = 800,000 - 400,000
Change in sales = 400,000
Ipo-ipo Corporation would like to market a new product at a selling price of P15 per unit. Fixed cost for this product is P1,000,
20%. How many units of this product mus be sold to earn a target operating income of P1 million?
A. 754,900
B. 833,334
C. 825,530
D. 785,320
ANSWER: B
Total Per unit %
Sales 15 100%
Variable Cost 12 80%
Contribution Margin 2,500,000.00 3 20%
Fixed Cost 1,500,000.00
Operating Income (Loss) 1,000,000.00
Given
*Since you cannot identify if you will use the lowest or highest output. Initially use the Operating Income as basis
Target Sales per unit = 1,000,000(Operating Income) / 3 (CM per unit)
Target Sales per unit = 333,333
From there use that basis which fixed cost will you use, since the target from operating income itself is 333,333 use the 1,000,
Operating Income 1,000,000.00
Fixed Cost 1,000,000.00
Target CM 2,000,000.00
Divide: CM per unit 3
Target Sales 666,666.67
Since the target sales is above 500,000 using the lowest Fixed Cost. Adjust the fixed cost to 1,500,000
Operating Income 1,000,000.00
Fixed Cost 1,500,000.00
Target CM 2,500,000.00
Divide: CM per unit 3
Target Sales 833,333.33
Or other way. Scan the choices all choices are above 500,000 units from there use the 1,500,000 fixed cost
The following data refer to cost-volume-profit relationship of K Co.
Breakeven point in units 1,000
Variable cost per unit P250
Total fixed cost P75,000
How much will be contributed to operating income by the 1,001st unit sold?
A. P250
B. P325
C. P75
D. 0
ANSWER: C
Total Fixed Cost 75,000.00
Divide: Breakeven point 1,000.00
CM per unit 75 *Workback
Multiply: Margin of Safety 1
Contribution in Income 75
Chuchay Manufacturing Company produces two products for which the following data have been tabulated. Fixed manufactu
Per unit Chu
Selling price 4
Variable manufacturing cost 2
Fixed manufacturing cost 0.75
Variable selling cost 1
The sales manager had a P160,000 increase in the budget allotment for advertising and wants to apply the money to the most
Suppose the sales manager chooses to devote the entire P160,000 to increased advertising for Chu. The minimum increase in
A. 640,000 units
B. 160,000 units
C. 128,000 units
D. 80,000 units
ANSWER: B
Selling Price 4.00
Variable Manufacturing (2.00)
Variable Selling (1.00)
CM per unit 1.00 0.25
Advertising cost 160,000.00
Divide CM per unit 1.00
Increase in target sales 160,000.00
*Note the question is to cover the increase in fixed cost only (advertising expense)
Suppose the sales manager chooses to devote the entire P160,000 to increased advertising for Chay. The minimum increase in
A. P160,000
B. P320,000
C. P960,000
D. P1,600,000
ANSWER: C
Per unit %
Selling Price 3.00
Variable Manufacturing (1.50)
Variable Selling (1.00)
CM per unit 0.50 16.67%
Advertising cost 160,000.00
Divide % of CM 16.67%
Increase in target sales 960,000.00
ommission of 10%. Fixed manufacturing cost totals P1,000,000 per month, while fixed selling and administrative cost equal P420,000. The
and an operating loss of P20,000. By how much would Neth need to increase its sales in order to achieve a target operating income of 10
100% (120000/15%)
75%
25%
15% Squeeze (25% - 10%)
10%
cost for this product is P1,000,000 for less than 50,000 units of output and P1,500,000 for 500,000 or more units of output. The contributi
n?
g Income as basis
itself is 333,333 use the 1,000,000 Fixed Cost
00 fixed cost
en tabulated. Fixed manufacturing cost is applied at a rate of P1.00 per machine hour.
Chay
3
1.5
0.2
1
o apply the money to the most profitable product. The products are not substitures for one another in the eyest of the company's custom
Chu. The minimum increase in sales units of Chu required to offset the increased advertising is
Chay. The minimum increase in revenues for Chay required to offset the increased advertising would be
ative cost equal P420,000. The incometax rate is 30%.
target operating income of 10% of sales?
units of output. The contribution margin percentage is
yest of the company's customers.
